Best Tax Tips

Congress has passed the Economic Stimulus Act of 2008 (2008 Economic Stimulus Act), which increases the limitation on expensing depreciable assets and also provides for 50% bonus depreciation on new equipment for the year it is placed in service. More specifically, the 2008 Economic Stimulus Act provides an increase in the expense deduction limitation under Code Sec. 179 from $128,000 to $250,000 and an increase of the phase-out amount from $510,000 to $800,000.

Because the increased amounts only apply to the 2008 tax year, you may want to plan your new purchases accordingly. The increased expense deduction will revert back to $125,000 (to be indexed for inflation) for qualifying assets after 2008. Further, the $125,000 deduction (as adjusted for inflation) is scheduled to revert back to $25,000 for tax years beginning after 2011. Similarly, in 2009, the phase out amount, which begins with every dollar spent over $800,000, reverts back to $500,000, as adjusted for inflation. It is scheduled to revert to $200,000 after 2011.